Ford invests $760 mln for new China plant, more capacity

HANGZHOU, China, April 19 Ford Motor Co is
investing $760 million to build a new plant in eastern China as
part of its effort to catch up with U.S. rival General Motors Co
in the world's largest auto market.

Ford said the new plant in Hangzhou in Zhejiang province
will initially boost the U.S. automaker's annual capacity in
China by 250,000 vehicles when production begins in 2015.
Construction is expected to begin later this year.

The announcement comes two weeks after Ford said it would
invest $600 million to build a third plant at its Chongqing
complex i n southwest China and is part of the largest and
fastest expansion by the company since the 1960s in North
America and Europe. Ford has now announced or begun building
eight assembly and powertrain plants in Asia.

"We're looking at this more than just this quarter or this
calendar year," Ford's Asia chief, Joe Hinrichs, said in an
interview. "We're looking at this as how does Ford set itself up
for success for the next several decades in Asia Pacific.

"People say, 'Are you too late?' No," he added. "You get one
chance to really come at the market with the full power of
Ford's product portfolio, but you want to be able to look
everybody in the eye and say you truly developed the vehicles
for China so it does require some patience."

Ford expects industry sales in China to hit about 30 million
vehicles by 2020, up from 18.5 million last year.

Ford has said that its growth plans in China are part of its
effort to increase global sales by about 50 percent from 2010 to
about 8 million vehicles annually by mid-decade. By 2020, it
said, about one-third of its sales will come from the Asia
Pacific and African regions.

Ford, which makes Fiesta, Focus, Mondeo and other sedans in
China in a three-way tie-up with Chongqing Changan Automobile Co
Ltd and Japan's Mazda Motor Corp, is a
relative latecomer in China, where GM and Germany's Volkswagen
AG have a sizeable lead. Ford sold 320,658 vehicles
in China last year, compared with VW's annual tally of 2.26
million and GM's 2.55 million.

DON'T PANIC

"Part of the reality of what we have today is that we have a
very limited product portfolio in China," Hinrichs said.

"We made a conscious decision back in 2010 not to panic and
go grab all the products around the world and put them into
China right away," he added. "We made a conscious decision to
wait to get into the early phase of the next generation of all
of those global products and...then design the vehicles with the
Chinese customers in mind."

Ford will gain market share as it rolls out new vehicles, he
said, adding it won't happen overnight. He suggested Ford will
be closer to full strength in China in 2015.

Hinrichs said there are so many automakers in China that he
expects some shakeout in the industry over time, but he declined
to predict which brands may suffer. Pricing pressure in
high-volume segments that started last year continues among
small and mid-sized cars, he said.

To narrow its sales gap, Ford has said it plans to bring 15
new vehicles and 20 engines to China by 2015, starting with the
redesigned Focus small car that is set to hit Chinese showrooms
in the second quarter. The company did not disclose what vehicle
it will build in Hangzhou or at the third plant in Chongqing.

Ford has imported vehicles into China since the mid-1990s
and formed its first joint venture there in 2001. Ford also
holds 30 percent of Jiangling Motors Corp, which
makes Ford Transit vans.

The Hangzhou plant will increase Ford's production capacity
in China to 1.2 million vehicles annually by 2015, including the
Chongqing expansion. After opening a second plant in Chongqing
six weeks ago to build the Focus models, Ford currently
assembles 600,000 vehicles a year. Chongqing is home to Ford's
largest factory complex outside southeastern Michigan.

By mid-decade, Ford, including both of its joint ventures,
will have seven assembly plants, two engine plants and one
transmission plant in China.

Ford said the Hangzhou plant in the wealthier coastal region
that is the heart of the Chinese auto sector brings the
company's total investment in China so far to almost $5 billion
and allows it to diversify its Chinese manufacturing and also
provide closer access to the country's affluent coastal cities.

By 2015, Ford has said it intends to more than double the
number of dealerships in China from the 340 it had in 2010 and
to double its workforce.

The rapid expansion in China led Ford to say this month that
it would realize a "small loss" in Asia in the first quarter.
Executives cited major investments in new products like the
Focus and the new Chongqing plant, as well as the midsized Ford
Ranger pickup truck in Asia and Africa. Ford said its Asian
operations will be profitable for the full year in 2012,
however.

Hinrichs, 45, has been viewed by many industry observers as
one of the candidates to succeed Ford chief executive Alan
Mulally. He declined to address the speculation, saying he was
focused on his current job.

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